How to Turn Your Loved Ones Into Your Business Backers
"Don't talk about escape routes if your business doesn't work," Arora says. "Don't talk about what you'll do if you have to sell the business. Talk about what your business will look like in a few years, and what you will do when you become successful."
One thing many entrepreneurs fail to discuss when asking for funding is how much of themselves they are devoting to the business, Arora explains. Investors need to know how much of your life savings, how much time and how much energy you're devoting. When they see how committed you are, they'll be more likely to give you what you're asking for.
When it comes to getting what you need, Arora says to be careful how you start the conversation -- and who you start it with.
"If you open by saying, 'I need money,' people are going to feel alarmed or defensive," he says. "Make people interested instead, even ask for their input. 'What do you think about my idea?' is a great way to get them engaged."Before you start any conversation, take a hard look at who is sitting across the table from you, Arora says. Ask yourself if they are financially comfortable, and if they're likely to be in two to three years. "Don't approach someone who is just trying to make ends meet, or someone who is going to have a kid in college in the next couple of years," he says. "These are people who may want their money back before your business becomes viable. You can't have investors who will need money in a year's time if your business is still growing." Keep an eye out for friends and family who are on a tight budget, expanding their families, buying a home or car, or paying tuition -- those people should never be approached for funding, he says. Also, Arora cautions against accepting too many offers for funding, even though it sounds like it might be a good problem to have. "If you talk to 50 people and each of them gives you $500 or $1,000, that's going to be very difficult to keep up with. You've got to be selective and know when it's better to take a single offer for $50,000," he says. "You can't have 50 people all coming to you at the same time asking you the same thing, 'How is the business? When will I get my money back?'"
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